McClatchy Co., publisher of 29 newspapers including the Miami Herald, may be the next print media giant to topple after seeing advertising revenues switch to the Internet.
Founded in 1857 as The Daily Bee in Sacramento, the company has two classes of stock, enabling the McClatchy family to retain control, for now. McClatchy bought the Knight Ridder chain for $4.5 billion in 2006, an ill-timed purchase as print revenues were already declining.
The Sacramento, California-based company may file for bankruptcy within the next year because of high pension costs and falling revenue, Bloomberg reported, citing media analysts. A company representative declined to comment when reached by Bloomberg.
Either in the case of bankruptcy or restructuring, “the McClatchy family would likely see a reduced position in the company,” writes Ken Doctor, media analyst and author of Newsonomics: Twelve New Trends That Will Shape the News You Get. “A bankruptcy would likely mean the end of its control.”
Investment fund Chatham Asset Management LLC, based in Chatham, New Jersey, is the largest holder of McClatchy debt and, according to Bloomberg, its largest shareholder.
“With McClatchy’s troubles — its share price collapsed last week, down 82 percent across five trading days — a new financial player steps to center stage: Chatham Capital,” Doctor said. “However McClatchy gets reorganized — and now it must be, one way or another — Chatham, the company’s biggest lender and shareholder, is in the driver’s seat.”
McClatchy is the second-largest newspaper group behind the new one formed this month by New Media Investment Group’s acquisition of the former Gannett newspaper chain. The new company, also called Gannett, owns about 500 newspapers, including USA Today, or about one out of every six papers in the U.S.
Doctor pointed out that the power behind New Media, Fortress Investment Group, is actually going to control the new Gannett, while Apollo Global Management will have some influence because it supplied the debt that enabled the merger.
- McClatchy reported a 12% drop in third-quarter revenue to $167 million from a year earlier and a net loss of $305 million. The company plans to stop printing a Saturday newspaper in all its markets next year, another sign of the dominant role that the Internet has assumed.
- “If you can’t beat them, join them,” appeared to be the idea behind print publishers agreeing to participate in a pilot program called Facebook News. The social network is pay news publishers including McClatchy, The New York Times, The Wall Street Journal and other sources widely considered reputable and reliable directly for content that appears in the section on its platform.
- Accounting giant PwC last year projected consumer and advertising spending on magazines and newspapers would fall 5% over the five-year period ending 2023.